I was told TO refinance..
Question: My bank’s financial advisor told me that I should take out a Home Equity loan because the interest rates are so low. (My mortgage is paid off.) He said I could invest the Home Equity loan money and make a profit on it, and take a tax credit.
I asked how much I would have to pay in fees and taxes vs. what I would make and he couldn’t answer. I also pointed out that with the stock market taking a dump I might end up losing some of the loan money. He just looks at me like I’m an imbecile.
So, am I really an imbecile?
Answer: You’re not an imbecile.
The “financial advisor” was trying to generate business for himself and the bank. If he REALLY thought you could make money on the deal, he’d have the investments laid out for you that would fulfill his promise. The problem is, he can’t, because there aren’t any “safe” (guaranteed) investments that pay that much!
If you have something to do with $$ from a home equity loan, by all means consider one as a cheap way to borrow money. However, if you don’t have an immediate need, you’d be much better off with a home equity line of credit with no closing costs. Your bank should be able to give you one for a significant amount ($50,000 or 50% of your home’s value) with no appraisal or other fees, and a variable rate of Prime +1/2% or so.
My credit union gave me one at Prime +0%, NO up-front costs (no costs whatsoever if I never borrow anything), check-writing privilege, 20-year amortization schedule (minimum monthly payment 1% of principal), NO prepayment penalties if I do borrow and pay off early.
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Filed under: Home Equity Loan
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